SMBK - Earnings call transcript Q2 2022

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Operator

Good morning and welcome to the SmartFinancial Second Quarter 2022 Earnings Call. My name is Breeka and I'll be your event specialist operating today's call. [Operator Instructions] I'll now have the pleasure of handing the call over to Miller Welborn.

So Miller, please go ahead when you're ready.

Miller Welborn

Thanks Breeka. of our we QX all us you to for today XXXX morning you appreciate and joining Good earnings call. be on to share excited on this call We're morning an update our company. the and progress, and for the to of in for We thank and questions, interest important comments you it's your you all have our feedback. hear us

of our President Corporate Strall, Gorczynski, our Ron Joining the today call CEO, Nate me and are Rhett Strategy. and Chief Jordan, on our Officer, Director Billy Carroll, our Credit CFO,

year. we to our ask believe morning exceptionally date. Alabama, the for proud have will have and to the our proud the our execution been please we was Before Tennessee, take customary I'd of very news each we're please minute first of and Florida to what of in in what company the team to and this we've to comments, of we particular I'm focus, continued and outlets a get With like QX over page a started, US to disclaimers great and you to statements, these. accomplish able very busy and the for filed turn deck economy made quarter Southeast refer that our going the normal I'm of forward-looking been to Billy. improvements media Despite in half to strong. markets you for it X lead that review the

Billy Carroll

jump quarter. what believe outstanding we everyone. Miller Thanks to and was morning, right into highlights I'll some good an

for of growth a reported pretty goal million organic be little XX% a XX% recent per leverage. both annualized on our loans quarter. result deposits. balance and growth main by much sheet Again operating nice annualized of lift year solid as organic sides a number We was share, lines even the in earnings $XX.X strong gaining and $X.XX that market on with we're still our headwinds where on annualized our momentum a our of integration operating it as the on new well, the outs, growth ahead if we schedule. markets. non-maturity or in mortgage right it growth not X% from we'd we've prior highlighted from our great communicated was nice had quarter on As of this been strategy our calls, on teams, And We a deposits, income great thought well as fee executing performance secondary noninterest front. has legacy facing This our was quarter

are working legacy been that The of for it's performed planned. expansion Alabama note There's enhanced profitability. And operating the Rhett going remained ticked leverage let and holding at to growth the leading also too. through with our expansions highlights as We now. just loan energy plan. are And right some started throughout These gaining lines and provide XX are continued not the company business great it's But a our mentioned the a from details strong deposit ancillary credit XX%. our refinement our of Nashville very to as executing quality our how in I'm in NPA ratio our growth. to have in movement our markets outs lift our we points. and Ron no recent expansion moment. of catalyst bank in recent ratio But basis down I have strong well some to as important show new a the efficiency markets

holding as we and expense over balances Expense of that well. growth. it. year-to-date, business will modest line in second platforms that XX% insurance continue continued very are like nice We've while wealth yields Equipment Fountain we focus our years fairly Our an both outstanding this to quarter. having continue include as and Finance We ways had group relatively believe controls expectations the and team been for gain half our really and expand for leverage to looking a are trend have grown

go to hand credit, Rhett? Rhett walk detail it me balance and to will expense sheet the some and and the ahead let through Ron provide on income over and So more side. then

Rhett Jordan

Thank you Billy.

equates Our million while loan quarter excluding growth growing ending toward approximately organic billion in with into our loans very the XX% PPP annualized steady and in strong first $XXX rate and the quarter-over-quarter each leases held in to and spread footprint mark target to yield split of forgiven average evenly growth Quarterly year continued million quarter loan the increase balances. and $XX QX reduction leases over loan regional well-diversified loans a net levels. was second This halfway segments for loan a across fixed portfolio the variable between of with $X evenly portfolio markets, products. under our outstanding, just just production

portfolio balance core slight previously time in only increase deposit million reduction deposit outpacing net with continued composition growing period. with QX, see balances to the deposits I mentioned earlier. $XX the mix four portfolio and deposit a consistency deposit growth the a maintain growth continue during through balance to affect growth saw deposit the continues mentioned basis a increase net in We balances over costs solid Loan to point in in

we production are markets. be to to of to our to liquidity excess ratio year levels, historic have significant is across recognize excited below of all continues track what loan-to-deposit we continue fund proving our to a While

economic performance personal to indicate relocations our economic market pressure While guidance recipe credit portfolio a conservative see for This our growth to of the coupled approach higher business to with the and quarters, footprint. and strong into resulting most in probability underwriting and bank's is through and great and both stability metrics outlook areas above business growth loan continued continues several historically next recessionary the average drive in of our strong market continuing XXXX. a market balance continue solid

loans quarters. XX basis better recovery results. to asset of and hold net ratio compared the a core our QX total each Non-performing saw XXXX prior improved of quality relatively or of and charged-off steady quarter unchanged due past than and from assets metrics classified performance QX points, loan balances Second two loans to

CRE construction well, the XXX% consistent total target. were prior that slight quarter in at a ratio CRE as CRE X% regulatory holding increase capital of Our guidance still ratios quarter to the and ended below the

in prior continue the product so, noted profiles of our As portfolio mix doing the managed CRE and diversification ratio comfortable guidance credit end have of feel given the CRE calls, we the very historically book. and upper to our of in

portfolio significant areas and in first Overall, across non-CRE in distributed loan to of continues XXXX strong and all with the evenly opportunities being results nature. portion half year. saw the a of outlook half pipeline our a volume optimistic very and loan of second be we in Our our are for our of market the in deposit strong

Ron our it allowance position. to turn to walk I'll over you through Now,

Ron Gorczynski

everyone. Thanks, morning, Good Rhett.

forward move X, loss Slide Let's to reserve. loan our

we end, During to X.XX%. provision and XX minimal allowance was was a loans with related our At to leases basis credit loan and reserves provisioning. million originated total the quarter, recorded loans at strong our quarter and $X.XX related to our total growth leases points at

On allowance provisioning We closely loan support adequacy evolve. to to while our credit Slide expect growth conditions continue to as XX. monitoring related economic and our production,

as of deploy At excess loans $XXX cash which growth and approximately XX, liquidity quarter, borrowings. million our a we support million assets with the future ratio of of to to able our of our execute we our growth securities are total cash in excellent to million were and our $XX fund $XX retiring FHLB million liquidity we position $XXX of initiatives. over For June includes represented position deposit and on strategic XX% XX%, loan-to-deposit and in

Our acquired margin loan related over despite increase accretion. point PPP and experienced a net a reduction quarter-over-quarter interest of to basis XX XXX,XXX having

quarter margin continues realized While earning rate-up this to mix expect we excess margin, shift to pressure liquidity continue the positive the during further expand our environment. to was overall in asset that our in second

monitor our metrics our closely, we revenue one to measure efforts. used the While operating of primary expansion remains margin

aggregate quarter-over-quarter you million same compared During quarter current related PPP revenue acquired particularly during to consider which an mortgage increasing of the fee had revenue based almost the the reduced we prior $X.X million year XX%. quarter. headwinds $X for over operating quarter the for banking $X is in quarter, when was impressive second This income, second annualized the to for increase loan, and million

of Additionally, while large growth was we June. majority during experienced the booked a the month of strong second loan quarter growth,

late strong in of Looking the we quarter's extremely booked ahead, believe on our revenue prospects as growth remain full quarter. we a loans those interest income operating experience worth

find some $XXX,XXX basis also $XXX,XXX. quarter, we are loan The rate range. points margin information. the accretion sensitivity again basis four loan margin fee includes and an XX, third accretion forecasting X.XX% On Slide estimated you'll PPP points in four the of For estimated or of interest a

positioned, point impact on be As shock well and balance increases increase net X% positive any of as scenario. sheet XXX our quarter further rates rate analysis static discussed short-term asset-sensitive continues rate over last interest in our end, a a net quarter, shows would and interest income to have and net income. margin At interest our up basis

Our historical our most sensitivity. conservative of as uses interest picture provides betas rate sensitivity modeling this the us

already from us and rate of market increases recent seen which market deposit the our we've to partially effect delay insulated some continue million full in affords cash us $XXX the to However, has lag as rate the ability increases.

losing strategy, million. the core not quarter over at or will noninterest jeopardizing relationships. we Slide generating good income, cost continue forward, but of On business had Going XX the of use client certainly another consistent we to $X.X

experienced a core interest result our but We our build department continue momentum of with banking to consistent as fee categories, headwinds in higher peers, mortgage rates. our income

our we second of were revenue. quarter which strong $XXX,XXX to team fortunate out generated markets of However, almost activity realize capital

opportunities markets quarter degeneration. to forecast in anticipating XX. $X.X expanding, to On of for diversifying our the same million range. in for is level the are not revenue, $X.X deepening our third Slide focus and continue million will capital We our growth Since noninterest we on income

we now begin continue are as to efficiency teams to platform. We and our improvements fully leverage optimize seeing our

ratio. continue We operating our efficiency

further to to to experience of our as the initiatives. the near our operating low expect rewards efficiency momentum steadily and We decline the strategic range XXs term ratio we build

For quarter, our operating our guidance. were expectations the with and line expenses in

anticipate we ebbs and forward, expense Moving our various invest people in in categories platform. as and flows we

a fully as investments generation of expect expense growth. vastly result we these outpace revenue However, to

are as potential range growth initiatives. an levels. million other book stable excellent we additional bank higher strong slightly of and accruals Slide continued per continue value credit At from $XX.X end, lending current and approximately rate production both our previous with with throughout bank's the on an monitors $XX.X run which remained tangible ratios to of due salary company XX, incentive our are capital a well-capitalized was Even Management opportunities the our it asset third quarter, of executing is quarter to quarter the million expense profitability. For and At at the as capital based On benefit and result relates positions and expense liquidity to position forecasting closely regulatory projected $XX.XX share. quarter XXXX. quality forecast exceeded to standards the end capital.

our in excluding our share losses of our was representing value However, a unrealized book year-to-date of per growth XX%. temporary AOCI over $XX.XX, the rate impact tangible annualized

important value tangible Our been turn With that back Billy. an our priority of management it book has I'll said over growth to team. and remains

Billy Carroll

Ron. Thanks

nice great is are energy our strong really The starting momentum a hit have recent stride really We now. added company. in hires right to this and

same. it far being Ron mentioned of our second year, the more the outlook for an the anticipate but half guidance, As some of of we as

We story. will story meeting fair to their been well and amount teams continue advisory Both they spending support are these model time received. of the operating teams being a and in over our move our And board markets to bank. prospects with our we've to communicate lift-out as new our clients very

to lending workflow and to We're live lending efficiency of this as integration help we this very quarter. well our the Our and forward new excited progressing platform side the seeing go nCino house. this grow about ready is look

ancillary and nice And mentioned, our we as I'm right push This growth quarter hires, good. capital be I new the with trajectory around to do a existing company level lines, and around said higher. business leveraging our of our rates said close, loan had the our accrete flat. will a in than markets our bit and I've The that and continue But projected like in needed the this growth capital award, company excitement near value in moderate recognition. Ron as associates in for have growth we it still take them, know to of look pipelines But go-forward I the listen regional confident double-digit did run a is a in to a low now this our that will growth celebrated thank team that tech We There work kept our they right continue number standpoint tell moment the to level markets to from on think now. growth to relatively asset is To with term grow sixth a standpoint. the from for little in a and anticipated great we've you I this initiatives we received corporate growth this mix stronger company Workplace and shareholders. call. organic really I our year, to quarter Top earnings levels grow capital can recently growth. levels, consecutive do wanted another of our at fund increase a change our a

our great SmartFinancial. associates. I time be involved a is to It great you all building appreciate do culture. in with this So to congratulations,

we'll stop up there. we'll open it and questions. for So

Operator

The Thank the Instructions] of you’re Stephen. Sandler. go you lines comes Stephen first phone [Operator on ahead ready, question Scouten Piper Please from when

Stephen Scouten

Good question it's -- morning much good hard would whole. growth. it around kind to go deposit the to everyone. guess, really a thinking I than on a what stronger it's first I the my you industry pace this are Thanks. project mean, guys of But in – as maybe, like know seems be environment. morning, continued continued I

the seeing curious, what you expecting So deposit just for remainder kind the of from of perspective. are a what And you're year?

Billy Carroll

we're in bringing as depository in lending us Again, one. some we is we're side. think, the tough. new some to bring around on our that both deposit really tougher can give Stephen, pipelines do as that grow to call markets, It have growth starting well clients have to these been loan confidence of folks the relationships. Deposits relationships, guidance. I Yes. new as continue

about me do what you're maybe probably of So, I guess, this half below loan here probably half at I'm optimistic. to same But we're think little a asking the in on say, we that doing quarter. we'll would clip side -- maybe we're that grew if but pace, to kind at at I probably deposits, would continue the not the near-term. grow I of around

Stephen Scouten

still that have concerns do curious, Okay. But That loans bullish trends. But is trends. pretty that the to some pace if growth loan it with economic of face double-digit be it's nice about range. you're of makes trepidation would telling sense. of sort what slower, in growing you how I thinking you around I into know Bill, in remain kind said the or is But market worsening know, growth And little still low guess, obviously, guys any us, your I'm market a a I of, more the maybe on just recessionary environment. wondering, you guys

Billy Carroll

it don't a at thing as moving seasoned changing we about move, lot we're too, underwriters. Yes. we're look always The changing, We much, We're conservative we're -- -- to really of not looking we're not not way business. the we're Stephen. loans. been -- We've also

a bit. continuing the had which in -- -- that time watching are business really near-term. inflow little have around But Obviously, markets to record do This get grow feel we're strong think not we're strong businesses watching is a that we we and about continuing balance the a had sheet about was do economy. probably the to and comments, little probably a will a feel next we at these and we're still -- now, on. than got it, But can the still had little we're it we're at forecasted. we're anticipated. to loans markets. pace, move this the the been growth. population we two We've to headlines, we as alluded I quarters, that Rhett -- in the over great mentioned the least a the good opening still his watching coming but very track but organic but Miller They've more, so I great slow operating in that I our seeing not so right grow strong in And markets one pace at very long think, history. over is

Stephen Scouten

I Got quarter. current sensitivity noted million thing It that quarter like NIM guys guidance within betas you the it. asset the back third deposit do gave XX% betas? future you in Maybe loan in into maybe out are information me. it. the adjustable. immediately if know, what are that's the in Got curious, for for, to that for deck, loan maybe $XXX details you assuming guys and just But seems, the I'm any have it last then within laid you and about beta, the was I try loans around even slide

those seeing kind So what of what And you're there. expectations? assuming just you're wondering, in

Ron Gorczynski

Yes. Yes, X%. good betas, a deposit about The over question. we're year-to-date little slightly

we quarter, do upward our third probably quarter. rates to in late our the For -- expect move

quarter, So have beta at And from we give Again, we're point. at around for lag, will then QX. what be this to we're through. of to the to to coming starting we're we're kind fourth to the closer that's back. that XX%, we see XX%, XX% be at much modeling benefited it pretty And historical looking but probably seems looking

react to starting pretty in commit we out the are and -- rate time the far the up on the deposits. the term for have timing third results. the really starting from quarter the excuse reaction see quarter impacts June first charge for closes, second to quarter it loans we're little by slower a much loans, and the As are as We loans bit by to seats the differences time do me,

in any looking quarter. do for And in. we the I directly probably As that. -- for far We're be all loan we're at I were XXX, XXX XXX-ish not have apologize, give the probably the estimating to range to as for betas that loan you indication, yields,

Stephen Scouten

on Ron. That's to Great see. much. Thanks extremely so continued helpful, congrats to everyone progress. And the

Billy Carroll

you, Stephen. Thank

Ron Gorczynski

Thanks. Okay.

Operator

Stephen. The next of question you, Thank comes Catherine from KBW. Mealor

open, is Catherine. line Your

Catherine Mealor

Good Okay. morning.

Billy Carroll

Good morning, Catherine.

Ron Gorczynski

Good morning, Catherine.

Catherine Mealor

one Just margin. more the on

Just, loans, the most assume that the come relatively bond and kind or to of, from going the excess Is into down bond cash of coming just, think will stable, you're how book to of planning we stays size about deployment book? just fair it that there? do of anything the but do liquidity

Ron Gorczynski

to at No, intend we first. cash use this point, our

stable. the relatively point, bond will be this at So book

are We month start time. point no, our have back again, But expecting what in, we're this experiencing anything of not this $X unless that's but, point, about at million of Catherine. different kind expecting at a Again, we'll coming story. then outpacing deposits a we're

Catherine Mealor

target Okay. your you when hit what's you And that Great. can Helpful. that timing gave the you us, number? efficiency then, XX, for think

Ron Gorczynski

at -- we the will definitely, looking way but quarter, range in We're the we're sooner quarter, be for optimistic, looking third quarter, but we're hopeful we'll mark, either quarter. $XX we'll low fourth the plays but that, than down for low see third but by in the hit third XXs that later, XXs, we'll out, it way. between We're that be and very fourth how the

Catherine Mealor

Great.

inflationary start that with hiring operating I historically. we year build year less And then, nice seen Okay. to next and than as see think such probably growth this about And we've year some growth the leverage. as couple pressures into what's expense the mean, But of rate next years. we the senior going we've would think plans imagine growth past next I you're about expense to expense rate big really year, had

Ron Gorczynski

Yes.

much we are as for QX. pretty I did good expectations mentioned, a have course, QX jump. Of

today. to know probably of blended range, increases some we Again, flat we're we're move million the holding that we and range million $XX $XX average into in. XXXX. our million, and to trying As That's what are But $XX quarter-over-quarter. hold today what on initiatives merit for seeing around what that's XXXX,

Billy Carroll

I'll Cathy. And just add,

-- XX now little going we pressure lot. little a new of of see. into bit get point teams we're the get -- look Ron offices But wage -- of a probably you this to of we'll said, leverage is to be in probably there months. bit to get part of obviously, We'll ahead, move probably wage great is just up all Ron's we'll to you'll it As it. think, this continued where be little have tick said, course obviously, yes, as shouldn't a areas, we stride next Like is but we a bit I -- with real these some hitting operating over yours, occupancy and and the most it's

bit will little think of but So moderate. fairly there'll be be we uptick, a an it

Ron Gorczynski

But than headcount. not -- it's We're more incentive

Billy Carroll

Yes, yes. not We're adding.

Ron Gorczynski

I growth. infrastructure mean, -- overall, yes. we're And

Catherine Mealor

the Congrats Very All quarter. on right. great Great. Thanks. helpful.

Billy Carroll

Catherine. Thanks,

Ron Gorczynski

Thanks, Catherine.

Operator

Matt Thank you. of Please ahead Stephens. We you’re Olney now when have go ready.

Matt Olney

Hi. everybody. Thanks. morning Good

Billy Carroll

Matt. Hey,

Ron Gorczynski

Matt. Hey,

Matt Olney

what excess margin around that to for funding the go and does $XXX within that the And deposit assume want back growth. liquidity I discussion third to of position? guidance million for quarter, the

Ron Gorczynski

a good Yes, that's question.

are pretty think, basis XX not to probably our points quarter by year. started We earlier basis to about is looking be draw liquidity liquidity -- points excess We're -- impact points, -- at will normalized excess this I XX range much cost up is basis We point. a the our end. today this more XX at probably

So, we're after deposits our are expecting excess now growth to really not excess just of much liquidity our some having that liquidity. funding the and have

neutral on front. So, that pretty much

Matt Olney

just that. clarify And to

the like close normalized sounds the fourth third did in by come to get And down quarter. the quarter I into levels liquidity end levels, it that right? So going were the

Ron Gorczynski

sir. Yes Yes.

Billy Carroll

Yes.

commented the ago. second looking I I we're at a think, it think, way, Matt, I at looking we're as the way it is

than I think the think grow bit faster We're deposit we near deposits. loan grow now side. can we side I a the think term still right -- we probably can little

feel we'll are in still a year on, from little just the but it's but we inherently fine. liquidity than spot And a going like be lighter push excess standpoint really as good tighter, So a probably liquidity that just little to that's today. a bit goes we

Matt Olney

this was normalized around right we point. would guess, as liquidity And a million around $XXX which Curious go the the Is the would be back that be. what of about a for to bank more if math X% at kind liquidity? what far look as point. assets, Okay. this I position at think dollar way like of average balance earning normalized would it to XXXX for

Ron Gorczynski

Yes. was we're have XXXX, and much in so and time to to our -- don't different going deposit we've our escalated. about I because we've abilities really What so gathering thinking we're go think back bank changed

Our target around our trending per goal towards. point and our to -- of keep That's our what this mix is that's to X% portfolio XX%, ideal around we're security our cash at and kind XX%. level X%

So as we wean level. down, we have everything at kind the ability and That's to looking deposits that make of what that X% happen the kind we're as long at as our together. comes cash of

Matt Olney

in Okay. That's was hires. in very new I big that. switching I terms just helpful. the year then, guess, year of for a know And last production gears XXXX

Just of as update year. new were far last maybe how number on year? that the compares this are to where an where as we hires And we Thanks.

Billy Carroll

bringing looking been the We on four around been I of most in Nate here has folks has a of relatively such this -- year this late so had it minimal. folks year, hiring probably, a kind our last to at get board added stat, huge over of year teams year. year, that Matt, We've but integrated. don't plan came maybe those or production I really guess have year it with this XXXX lot but really last our

We next in. we're conversations. to to we income to should on good add where But continuing our we So of that continuing to wave as of we start have to happen get get as starting team together. get of all right mesh that quickly. really platform think pretty We're to work really but there our we our thinking the now that facilities and kind we're members start process in back just kind is opportunity now, statement continued of zones to it it about slowly want right be all out kind

Matt Olney

you quarter. the Congrats Thank guys. Okay. on

Billy Carroll

you, Thank Matt.

Ron Gorczynski

Matt. Thanks, Thanks.

Operator

We have Please when go of you, ready. you’re Thank Janney. Matt. ahead, now Strickland Feddie

Feddie Strickland

everybody. morning, good Hey,

Billy Carroll

Good morning, Feddie.

Ron Gorczynski

Good morning, Feddie.

Feddie Strickland

it I puts talk the guys lines what up I And on beyond bit a Can non-interest bullish and wanted pretty overall despite glad – leasing to are prepared mortgage. income different the see was about I remarks? to little the you non-interest income the takes sounds business. like of Equipment across you more Fountain lower your kind just are ask

Billy Carroll

was guess, Feddie income that what guess I more? to I question little a want bit you was? the drill that line to the the Ron, – question non-interest into Is

Feddie Strickland

Yeah.

I line you down Just going insurance curious going was on we the but lines places. I know cetera, and are the forward? on think some at seasonality what your management, other forward? had what down But most seeing expectations mortgage guys wealth are just we're et

Ron Gorczynski

from management as QX bounce the do once around QX. coming then of apply it with we more a expect wealth It's hundred lift-out a and a some point the forward uptick spot seasonality I think QX we that bit – we what QX we XXXX. insurance we late couple going has grow but base were remainder Insurance up. QX, we little in last where a been a for looking year thousand at more more good a did then contingency Going where timing us and our Again very We're looking is QX had and to picked we base – and stronger bright – fees industry rate our for back of that of forward. probably it's us will year. for they from from revenues our But the are get consistent time will the – for year into will kind – is revenue. low of really the

will really Our but but environment I'm probably, we not that's say, that's or rate to specific. miss. a not have – it's pipeline And we capital of not markets hit going those, We been we small some are QX, we do nearly and steady most Mortgage QX. we've in-house. as at but and much those steady have all been income have expecting The blessed much been slower, pipelines not more what we have are during as taking to QX. for – have

to I pretty back get QX of we is for and efforts. be that to to – I – we But year. and as just excuse me, think service closer change in XXXX through expect over much think QX going as customer levels fees get flip QX, ongoing XXXX going next we to be

much slow So than detail. that bit a too too tick little wanted will Probably information a a more be going much upward little forward. what bit you

Feddie Strickland

No, that's I of guys think built great. you years. over part have big the that's mean, a I something

bit. you Where think get the And into. something gears through you've the little initiatives wondering, I accomplished, switch the of and do just to upcoming have you most those can you opportunity see a some little was near-term? what in to So out upcoming bit it's initiatives worth talk of XX. technology slide if a on I

Billy Carroll

Yeah.

measure excited in kind model I price for to also nice we guess, that system and with loans win. able just and Looking the that I'll profitability from our in and We're of obviously give highlighted, the little the really us. one rudimentary standpoint recently and We've a rest at can the appropriately chime some bit. I a team start. being live Feddie jump excited appropriately most this then to that this team and the to the – we've on biggest some think that for that is side. workflow our on ability fee that probably – nCino dividends way going quarter. price, this believe is to to think reengineering and integration. We're loan side putting great deposit thing do we spent we We the really is time to the piece pay whole is going but of go see of really had our the

new piece. a We the huge ATM initiative team. So just rollout, that's been pushed I a on believe biggest

things updating recently acquired the machines can we're standpoint, other we I number doing we lot them had be Feddie from that through like think had I -- Zelle, it's start really internal into smart an we’ve here figure of – trying of older just And previous mobile a go acquisitions. live be one out automation that. with to of be it it we ATMs. it really had more that is a that how deposit our transactions just channels, push

ways other transactions really through now be initiatives channels. could behind more -- help technologies right of maybe And so just putting we're some some to branch efficient those drive handled that some drive

been biggest we Nate missing have probably push. the say out, that that's I'm that of on ones so those I the been a biggest are the and right. anything outside And big nCino thinking focused I'm would ones But ATMs

Billy Carroll

Its for Nate.

Nate Strall

Yes. The on have areas. all would been impact

Rhett Jordan

ATM of XX% That's the about fleet.

Billy Carroll

but upgraded Yes. models, these new into helps hopefully Feddie. Have that been

Feddie Strickland

right? -- No already in that's run rate, definitely that the expense included and

Billy Carroll

That is correct.

Rhett Jordan

Yes.

Feddie Strickland

Got it. for last Perfect. And, I question guess, one me.

want Just and infill as you or existing growing your across markets? you you of, focused there integrating way on to look is any more or just, footprint kind expand, are your

Billy Carroll

now kind I we're Not every in in footprint. MSA MSA Alabama, every when really. you in Panhandle. Tennessee, we our mean where I growth the in look Yes, are in love at of growth

just And at zones of so by those think when you leveraging look of our I our just markets talent. more is it kind now a lot and adding zones

Rhett Jordan

-- density. density Density,

Billy Carroll

Yes.

I big do say not large more obviously could zone. a there's market. year. for That's last such added Nashville. But us we standpoint. And strength one some a It's zone That's where Nashville a now. We've continue so such just now Birmingham… the been in. market really from more to would in a We'd probably expand right to market more Nashville there just love we've is

Rhett Jordan

of Lot Birmingham.

Billy Carroll

there. Tons opportunity of

really where resource folks. is more So probably standpoint a support and into already focus MSAs from continue larger with near-term little a just the to new probably maybe we've going we'll where those got markets

Feddie Strickland

my Thanks guys. on a Congrats great me. quarter. sense answering to for question Makes

Rhett Jordan

Thank you, Feddie.

Billy Carroll

Thank you.

Operator

now We have Fitzsimmons of Feddie. you, D.A. Davidson. Thank Kevin

open, Your now line is Kevin.

Kevin Fitzsimmons

Hey, good How morning, everyone. are you?

Billy Carroll

Kevin. Hi,

Rhett Jordan

Kevin. Hi,

Kevin Fitzsimmons

call late. banks most little fear apologize any where an of yet warning and the now got covered evidence about credit or I it I there's the right recession, outset point this know direct on projections I the all aren't a if kind on -- But the signs. looming seeing of a but we're of Just you on interesting

CECL You guys yet. are under not

historical to have So model. you reserve curious it, wondering limited? Thanks. under how the reserve In just I'm just want point losses but that you allowance at forward? up be unable to to under when because going other any you're you would you any about you're historical words -- your I'm look taking you kind of more are don't thinking to you then that really -- have are

Billy Carroll

you want do to... Rhett,

Rhett Jordan

other we about both that where with pretty I'll Kevin, take like. you Ron feel and think we you can first our I good are it model. any historical No, add then

not-too-distant in future. Of the course, to are CECL transitioning we

as So results that particular rate that what's the But that adequately. feel been factors to and address a to out that expect Clearly, the could pointed look to you to adjustment have modeling that to of it particular operation the expectation. or methodology and still is sure challenging that is estimate all is coming has our profile try and you sort always weaken able expense the clearly for you to we done what But know always downward stress credit that in conservative. our perform sustain project when or some time to comfortable a the that approach as bend. be can stress the just transaction interest around way best stress make you business we at

taken always as when the from much take. the model we as needed the qualitative that think approach Ron feel standpoint, so positioned and that's to that on and don't allowance at good And to to we really this add. anything where we're factors there's can continue affect if based use we we approach in And we've point. know I that's our about look an I certainly parameters we

Ron Gorczynski

No think you hit not, or we expectations the our same. were high be don't I all the whether CECL would points.

not where I issues of I think provision. or that in directly seeing we're add economic seeing, any our anymore we're cause at. footprint, looking good today, it's mean to credit in forward us would a we're kind spot

Rhett Jordan

what doing That's we've there. been

Ron Gorczynski

Yes.

Kevin Fitzsimmons

bankers, revenue couple and it been is new from year increased Okay. Great. and this XXXX busy but of brought was showing seems Thank already and like a up you. hitting of maybe And the on and hires a focus the – new leveraging now growth adding very that, times the loan has that. just profitability

demonstrate still it some talent. not being lift-outs inbounds you're – tap you pretty or that some show, join you're add have kind steam to that? selected and banks interested in want hires to want the joining terms like markets. ahead. to you're sounds Like FHA full to you balancing that get brakes to busy activity generally in markets going no. having normally of if you in had are or we've on want but the hires them the Are of in to how certain you and and new Bill, you you And you'd where going in are TD you would profitability, or new On looking merger there's really but for new If getting the want new you one they come Southeast, announce biggest yet on other some want hand, markets go

Billy Carroll

word We Yes. have said we're And the half, We're a you getting not to this as folks believe see this kind We're the first and on board. wave. on ready. ready bring first in it's tapping standpoint, balance. of to second they're as the brakes. we when can and we wave our will had opportunities you perform continue we From here

say, ability a budget had leveraging those we continue – we'll production spot talent we a hires. be a some to We watch We're As pretty where our are good continue when stay we I revenue. in to – really additional to rule I nea-term. it. need thumb. want And good and to balance to of start do markets, for think with that's we've in show into demonstrate doing to to We're grow folks I nice do here said, to he expense continue close Obviously, add it. friend then zones, going we opportunities. these to the think got had we and that a our to it. I base in this never we've And

but on ready. continue we when to folks next add look So quarter we're navigate they're the per to continue as to to keep going foot gas lightly the or so

Miller Welborn

we the spend in we the but time and ton of recruiting are on to their book I'll what particular we're bunch of looking they of talking markets about a and a in pretty culturally how darn folks what business time say projections different fit and at.

right to looking the So, we're be great it's fit, for got [indiscernible]. always but

Billy Carroll

did our much gas that beginning off foot digest As I -- integrated we is what kind for Miller to did year. yes, the think take us think foot alluded to at we I Kevin, the of took the our we we -- of we that. needed so We

first And during done to balance sheet the income so that we've statement. into kind the through of the half. we're and starting flow now And see that

we're to So, continuing opportunities. look for those

in open deals are Southeast the think there doors us. some mentioned that we You could several up for

to anytime looking brakes not and any chatting and tap watching constantly soon. we're So,

Kevin Fitzsimmons

very loan more a of quickly last or me strong above. customers of pace of moderate not downturn more one stance And for proactive what you're from outlook seeing the that all into is as going growth, one or is coming just off a growing for to very, potential more or a quarter, a The Bill. it little be

Billy Carroll

really it low on trajectory grew loan It's to XX% I double-digit the first. is moderating the dang so, a side It's good. clip pretty more we more down QX. mean really annualized -- -- and just the in

good. pretty So

Miller Welborn

No, than it's good. better Right. pretty

Billy Carroll

grower ahead. in projected a Who year, had looking having up. a spike might So, of we kind slow little what of what of the Obviously, function here can we phenomenal bit. we knows really of just it's we to growth But be we're -- feel feel the half the continue down -- like probably still ahead really in rates where near first a term.

what half feel probably to going Second we're see from forward. is consistently we like to this going going of be more team

Kevin Fitzsimmons

that. argue can’t much. I any Thank Okay. with very of you

Billy Carroll

Thanks, right. All Kevin.

Miller Welborn

Thanks, Kevin.

Operator

Kevin. [Operator Taylor of go Taylor. you’re another Thank Brodarick ready, you, ahead have We Hovde Group. question now Please Instructions] when from

Taylor Brodarick

in cycle? just service thinking about does that Brett just last Hey, of on the to that, the quarter in sort of Deposit improved previous. betas, subbing compare compares Just thinking how and the how charges that in I'm for of today. from context

Ron Gorczynski

we're at XX%. Historical, Yes.

two I almost a think, lag quickly. were quarter that. almost we quarters and half, up XX% managed pretty to We've of

had what cycle. last than So we've we are extremely the in doing better

So next quarter we we'll the kind today. we're what see of that's betas definitely again, probably the looking cut brings, But but at half. in what

Taylor Brodarick

I think a don't efficiency initiatives, but and ebbs the And assume there to do I sometimes flows anything tech, if I you besides know outside there of the was would about? comp, about -- could that with fruit of low-hanging of work anything on there? else know or else that sort that that digital lot is think

Billy Carroll

Not -- have efficiency really probably fruit out. Ron of really lot lot think there's the thin done. a And a as standpoint, been Taylor. not low-hanging From I don't our said, we work's to of

a it's we're refinement. continued things here that. and penny it's there I And contracts nickel renegotiating like just think

scrub I little that think I a ongoing an should just expense It's pieces. the and that numbers there's So big themselves. that. well any grow of would But of take just line inflation is not then And we couple moderate the revenue. line. think with going areas care of the We by of expense fairly more to there's a say in

Ron Gorczynski

Yeah.

be are that $X savings can just as need kind initiatives internal assist expense that later driven, software do $X billion grow we What what processes looking we could it not as to our expense always but really get billion Additionally on, we to us. at the mark. of do to different,

to trying So next the make we're and day always always exploring better.

our going -- with and ongoing So something that's going always that's forward. forward today teams management

Taylor Brodarick

about about And footprint, one you that? to think do know And anything the defense attractiveness to But about on do Great. lot the of you don't people. lift-outs playing producers. you and if I that? there's We've activity and more have And irrational me. to adding think trying -- given how talked how for a acquire

Billy Carroll

team Yeah. Taylor, play good It's you a defense occasionally. when -- of do point. great some folks, have got a It's -- that's to you

think creating on. culture really work. we Again, alluded the focus that. to focus do So organization. That's a this we I to I We great place on of something

of make to -- and available continue continue putting the recruit they I make sure right that we to retain. that resources leadership resources their to can the right to think giving sure we're

went I scenarios. your defense that of part today of is I think it. those it is think typically with. out part And better it's something banks but It -- all your in deal better and cultures So companies,

Taylor Brodarick

for lot a commentary. Thanks Great.

Billy Carroll

Taylor. you, Thank

Ron Gorczynski

Taylor. Thanks

Operator

Thank you, Taylor.

We have further no questions registered.

closing hand to for like I'd So Miller some back to it Welborn remarks.

Miller Welborn

again Breeka. today. joining Thanks you for Thanks us to each of

Thanks. questions. As to I have a any And great have directly of you hope us if you of each week. always, out additional please any reach

Operator

for Thank call. you Thank joining. all. you conclude That today's does

disconnect now lines. may You your

SmartFinancial (SMBK) 26 Jul 222022 Q2 Earnings call transcript